Imagine you are a reasonably sized financial or enterprise software company turning over, say, £125m or so. How would you feel if a $30bn-plus giant splashed into your pool? Concerned? What could the giant possibly have in mind?
This is what software vendors have been asking themselves ever since Microsoft started acquiring midmarket financial systems houses. It now has four under its belt – Navision, Great Plains, Axapta and Dr Solomon in the US.
Each suite has its own country product manager and is fairly well run as an independent entity. Navision and Great Plains used to compete head-on and still do, to the annoyance of some Microsoft reseller partners. Axapta sits one level above these two products and is much more of an enterprise product at a fraction of the cost of, say, an SAP or Oracle implementation.
The purchase of these systems houses and products has bought Microsoft an excellent seat at the midmarket table and a strong portfolio of midmarket corporate customers. But why does a company with masses of revenue from operating system, database and generic office products want to play in what is, after all, a fiercely competitive market that already has far too many players?
If you ask a Microsoftie, they will tell you that with Microsoft planning to transform business with its .Net web services, it makes sense for the company to get into business software proper. But that’s not an answer that will shed much light for most, as few people actually know what the .Net web service is.
.Net can be summed up as any-to-any connectivity: any bit of data to any bit of data, any client to any client, any server to any server, any bit of software to any other bit. Microsoft has invested many billions of R&D dollars into trying to make interconnecting all these elements in a plug-and-play way more feasible. The delivery date for the full .Net vision, however, is some way off.
As Microsoft Great Plains product marketing manager Adrian Morrish explains, we will see a new generation of business and financial software appear some time around the launch of the next version of Microsoft Windows, codenamed Project Longhorn. “When Longhorn arrives in 2007, we will see as radical a move forward as the leap from DOS to Windows,” Morrish says. Longhorn will be a .Net-compliant operating system, which is what the new business software, codenamed Project Green, will require.
Clyde Bennett, product solution marketing manager for Axapta, reckons that because it is focused on .Net, the new system will be different from the way software is currently written. It will, he says, transform the business applications market and redefine the role of vendors in it.
“No vendor will have to sit down from scratch to write a nominal ledger again. They would simply take a foundation license for the best industry standard set of ledgers and add their particular niche expertise and intellectual property to that core product,” says Bennett.
Instead of playing catch-up every time one of your competitors comes out with a more advanced way of doing something, you would simply add their functionality to your own offerings. .Net is intended to be a huge platform for innovation. It will enable the smallest software houses to bring their offerings to market with remarkable speed because of its Lego-like clipping together of disparate bits of functionality to form sophisticated systems.
So, does Microsoft’s midmarket entry change the game for vendors? Yes, probably radically. Come 2007, vendors will start to be more reseller-like, adding value to standard offerings through deep business process skills in niche industry sectors rather than by writing great suites of applications from scratch.
Vendor R&D bills may go down, but they will need to invest more heavily in specific industry expertise. And they will need to know their way around a zillion different components and Microsoft tools. The change will probably be slow, but if the .Net vision is right, change will be inevitable.
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